SEC "Surrenders" On Ripple Execs Charges

The SEC's "capitulation" may have been a tactical move to win their war against Ripple.

The SEC has seen three major defeats in its battle against Ripple Labs and its execs.

All charges against Ripple CEO Brad Garlinghouse and the company's co-founder and executive chair Chris Larsen have been dropped by the SEC. 

Alongside the regulator's case against Ripple Labs, the pair had personally been charged with aiding and abetting Ripple’s institutional sales of XRP. Garlinghouse posted on Twitter/X:

Chris and I (in a case involving no claims of fraud or misrepresentations) were targeted by the SEC in a ruthless attempt to personally ruin us and the company so many have worked hard to build for over a decade.

The SEC repeatedly kept its eye off the ball while secretly meeting with the likes of SBF – failing again and again to protect US consumers & businesses. How many millions of taxpayer $ were wasted?!
Feels good to finally be vindicated.

The dismissal of charges was characterized as a "surrender by the SEC" by Ripple's Chief Legal Officer, Stuart Alderoty.

The SEC's case against Ripple has lasted four years. The company has scored a number of legal victories over the SEC this year, particularly in the judge's ruling that XRP is not a security, and that sales of XRP on exchanges do not constitute the sale of unregistered securities.

While Ripple still has to fight the charge that sales of XRP to institutional investors violated securities laws, the dismissal of charges against the execs, and the avoidance of that trial, may be yet another indication that the regulatory winds in the US are changing. However, other analysts have suggested this is a tactical move by the SEC to keep back material that will help them win their case on institutional sales, which is their ultimate goal.

SEC: On The Back Foot

The SEC has suffered a number of high-profile defeats in recent months, as its campaign to rein in the crypto sector—which agency Chair Gary Gensler views as rife with non-compliance and manipulation—falters.

Aside from the three Ripple defeats, Grayscale was handed a win by the judge after taking the SEC to court. Grayscale argued that the SEC had treated it unfairly by denying its application to convert the Grayscale Bitcoin Trust (GBTC) into a spot ETF, on the grounds of concerns about market manipulation. Grayscale argued, successfully, that the measures in place to prevent manipulation were adequate, and had already been approved by the SEC in the context of bitcoin futures ETFs. Grayscale has recently re-filed its application with the SEC.

Shift In Sentiment

The entry of huge financial institutions including BlackRock into the bitcoin ETF space has heralded a shift in sentiment. Approval of spot BTC ETFs is now viewed practically as a certainty, very likely within the next 3 months, since further refusals by the SEC would almost certainly lead to more costly and embarrassing court battles, at a time when the legal consensus has turned against the agency.

Recent filing updates suggest that the SEC is now engaging constructively with applicants, rather than running down the clock on the approval process before finally denying applications at the last moment.

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